China's and Japan's economies are respectively the world's second and fourth-largest economies. In 2008, China-Japan trade grew to $266.4 billion, a rise of 12.5 percent on 2007, making China and Japan the top two-way trading partners. China was also the biggest destination for Japanese exports in 2009.

There has been an increasingly large dislike, hatred and hostility between Japanese people and Chinese people alike in recent years. According to a 2014 BBC World Service Poll, 3% of Japanese people view China's influence positively, with 73% expressing a negative view, the most negative perception of China in the world, while 5% of Chinese people view Japanese influence positively, with 90% expressing a negative view, the most negative perception of Japan in the world.[3]

After the establishment of the People's Republic of China (PRC) in 1949, relations with Japan changed from hostility and an absence of contact to cordiality and extremely close cooperation in many fields. Japan was defeated and Japanese military power dismantled, but the PRC continued to view Japan as a potential threat because of the presence of United States Forces Japan in the region. One of the recurring PRC's concerns in Sino-Japanese relations has been the potential re-militarization of Japan. On the other hand, some Japanese fear that the economic and military power of the PRC has been increasing (cf. Potential superpowers#China).

Like most western nations at the time, Japan had recognized Taipei as the sole legitimate Chinese government. Initially, neither country allowed its political differences to stand in the way of broadening unofficial contacts, and in the mid-1950s they exchanged an increasing number of cultural, labor, and business delegations.

The PRC began a policy of attempting to influence the United States through trade, "people's diplomacy", contacts with Japanese opposition political parties, and through applying pressure on Tokyo to sever ties with Taipei. In 1958, however, the PRC suspended its trade with Japan—apparently convinced that trade concessions were ineffective in achieving political goals. Thereafter, in a plan for improving political relations, the PRC requested that the Japanese government not be hostile toward it, not obstruct any effort to restore normal relations between itself and Japan, and not join in any conspiracy to create two Chinas. After the Sino-Soviet break, economic necessity caused the PRC to reconsider and revitalize trade ties with Japan.

The Soviet Union suddenly withdrew Soviet experts from the PRC in the 1960s, which resulted in an economic dilemma for the PRC. The PRC was left with few options, one of which was to have a more official relationship with Japan.

Tatsunosuke Takashi, member of the Liberal Democratic Party (LDP) and of the Diet and Director of the Economic Planning Agency of the Japanese, went to the PRC in order to sign a memorandum that would further the trade relations between the two countries, better known as the Liao-Takasaki Agreement. Under its terms, Chinese purchases of industrial plants were to be financed partly through medium-term credits from Japan Export-Import Bank (JEXIM). The accord also permitted the PRC to open a trade mission in Tokyo and in 1963 paved the way for Japanese government approval of the export to mainland China of a synthetic textile manufacturing plant valued at around US$ 20 million, guaranteed by the bank. Subsequent protest from the ROC caused Japan to shelve further deferred-payment plant exports. The PRC reacted to this change by downgrading its Japan trade and intensified propaganda attacks against Japan as a "running dog" (Chinese:"走狗") of the United States.

Sino-Japanese ties declined again during the Cultural Revolution, and the decline was further exacerbated by Japan's growing strength and independence from the United States in the late 1960s. The PRC was especially concerned that Japan might remilitarize to compensate for the reduced US military presence in Asia brought about under president Richard Nixon. As the turmoil subsided, however, the Japanese government– already under pressure both from the pro-Beijing factions in the LDP and from opposition elements– sought to adopt a more forward posture.

In December 1971, the Chinese and Japanese trade liaison offices began to discuss the possibility of restoring diplomatic trade relations, and in July 1972, Kakuei Tanaka succeeded Eisaku Satō as a new Japanese Prime Minister. Tanaka assumed a normalization of the Sino-Japanese relations. Furthermore, the 1972 Nixon visit to China encouraged the normalization process. His visit to Beijing culminated in the signing a joint statement on September 29, 1972. It established diplomatic relations between Japan and the PRC. From a Chinese point of view, an impressive compromise was attained. The Japanese agreed to most of the PRC’s demands, including the political status of Taiwan. Subsequently, the bilateral economic relationships grew rapidly: 28 Japanese and 30 Chinese economic and trade missions visited their partner country.

The abnormal state of affairs that has hitherto existed between Japan and the People's Republic of China is terminated on the date on which this Joint Communique is issued.

The Government of Japan recognizes that Government of the People's Republic of China as the sole legal Government of China.

The Government of the People's Republic of China reiterates that Taiwan is an inalienable part of the territory of the People's Republic of China. The Government of Japan fully understands and respects this stand of the Government of the People's Republic of China, and it firmly maintains its stand under Article 8 of the Potsdam Proclamation.

The Government of Japan and the Government of People's Republic of China have decided to establish diplomatic relations as from September 29, 1972. The two Governments have decided to take all necessary measures for the establishment and the performance of the functions of each other's embassy in their respective capitals in accordance with international law and practice, and to exchange ambassadors as speedily as possible.

The Government of the People's Republic of China declares that in the interest of the friendship between the Chinese and the Japanese peoples, it renounces its demand for war reparation from Japan.

The Government of Japan and the Government of the People's Republic of China agree to establish relations of perpetual peace and friendship between the two countries on the basis of the principles of mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each other's internal affairs, equality and mutual benefit and peaceful co-existence. The two Governments confirm that, in conformity with the foregoing principles and the principles of the Charter of the United Nations, Japan and China shall in their mutual relations settle all disputes by peaceful means and shall refrain from the use or threat of force.

The normalization of relations between Japan and China is not directed against any third country. Neither of the two countries should seek hegemony in the Asia-Pacific region and each is opposed to efforts by any other country or group of countries to establish such hegemony.

The Government of Japan and the Government of the People's Republic of China have agreed that, with a view to solidifying and developing the relations of peace and friendship between the two countries, the two Governments will enter into negotiations for the purpose of concluding a treaty of peace and friendship.

The Government of Japan and the Government of the People's Republic of China have agreed that, with a view to further promoting relations between the two countries and to expanding interchanges of people, the two Governments will, as necessary and taking account of the existing non-governmental arrangements, enter into negotiations for the purpose of concluding agreements concerning such matters as trade, shipping, aviation, and fisheries.

On 5 February 1973, the PRC and Japan agreed to reestablish diplomatic relations.[6] Negotiations for a Sino-Japanese peace and friendship treaty began in 1974, but soon broken off in September 1975. The PRC insisted the anti-hegemony clause, which was directed at the Soviet Union, be included in the treaty. Japan objected the clause and did not wish to get involved in the Sino-Soviet split.

However, the death of Mao Zedong in 1976 brought economic reform to the PRC, which led to the expected Japanese investment in the Chinese economy.

In February 1978, a long-term private trade agreement led to an arrangement by which trade between Japan and the PRC would increase to a level of US$20 billion by 1985, through exports from Japan of plants and equipment, technology, construction materials, and machine parts in return for coal and crude oil. This long-term plan, which gave rise to inflated expectations, proved overly ambitious and was drastically cut back the following year as the PRC was forced to reorder its development priorities and scale down its commitments. However, the signing of the agreement reflected the wish on both sides to improve relations.

In April 1978, a dispute over the territoriality of the Senkaku Islands (or Diaoyu Islands), a cluster of barren islets north of Taiwan and south of the Ryukyu Islands flared up and threatened to disrupt the developing momentum toward resuming peace treaty talks. Restraint on both sides led to a resolution.

At the end of 1978, the then prime minister Ohira said the government of Japan would offer ODA to China.[7] Official Development Assistance (ODA) from Japan to China began in 1979 and from that time to the present, approximately 3.1331 trillion yen in loan aid (yen loans), 145.7 billion yen in grant aid, and 144.6 billion yen in technical cooperation have been implemented up to June 2005 and has not ended.[8]

A "Golden Age" marked by the development of complementary interests flourished from the 1980s to the mid-1990s. Sino-Japanese relations made considerable progress in the 1980s.[citation needed]

The General Secretary of the Communist Party of China (CPC), Hu Yaobang, visited Japan in November 1983, and Prime Minister Nakasone reciprocated by visiting the PRC in March 1984. While Japanese enthusiasm for the Chinese market reached highs and lows, broad strategic considerations in the 1980s steadied Tokyo's policy toward Beijing. In fact, Japan's heavy involvement in the PRC's economic modernization reflected in part a determination to encourage peaceful domestic development in the PRC, to draw the PRC into gradually expanding links with Japan and the West, and to reduce the PRC's interest in returning to its more provocative foreign policies of the past.

Many of Japan's concerns about the Soviet Union duplicated PRC's worries. They included the increased deployment in East Asia of Soviet armaments, the growth of the Soviet Pacific fleet, the Soviet invasion of Afghanistan and the potential threat it posed to Persian Gulf oil supply routes, and an increased Soviet military presence in Vietnam. In response, Japan and the PRC adopted notable complementary foreign policies, designed to isolate the Soviet Union and its allies politically and to promote regional stability.

In Southeast Asia, both countries provided strong diplomatic backing for the efforts of the Association of Southeast Asian Nations (ASEAN) to bring about a Vietnamese withdrawal from Cambodia. Japan provided substantial economic assistance to Thailand to help with resettling Indochinese refugees. The PRC was a key supporter of Thailand and of the Cambodian resistance groups.

In Southwest Asia, both nations backed the condemnation of the Soviet occupation of Afghanistan; they refused to recognize the Soviet-backed Kabul regime, and sought through diplomatic and economic means to bolster Pakistan.

In Northeast Asia, Japan and the PRC sought to moderate the behavior of their Korean partners, South Korea and North Korea, to reduce tensions. In 1983 both the PRC and Japan strongly criticized the Soviet proposal to redeploy some of their armaments to Asia.

Under Prime Minister Nakasone Yasuhiro, the Japanese government reemphasized the relationship to the United States. The U.S. strategic emphasis upon East Asia allegedly shifted the PRC to Japan in 1983. Beijing felt isolation and concerning anew about possible revival of Japanese militarism. By the mid-1983, Beijing had decided coincidentally with its decision to improve relations with the Reagan administration of the United States to solidify ties with Japan.

Economic issues centered on Chinese complaints that the influx of Japanese products into the PRC had produced a serious trade deficit for the PRC. Nakasone and other Japanese leaders tried to relieve above concerns during visits to Beijing and in other talks with Chinese officials. They assured the Chinese of Japan's continued large-scale development and commercial assistance, and to obstruct any Sino-Soviet realignment against Japan. The two countries also concluded a bilateral investment treaty in 1988 after seven years of tough negotiation, where China finally agreed to grant Japanese investments with "national treatment".[10]

At the popular level in the PRC, it was not easy to allay concerns. Student led demonstrations against Japan (cf. Anti-Japanese sentiment in China), on the one hand, helped reinforce Chinese officials' warnings to their Japanese counterparts. On the other hand, it was more difficult to change popular opinion in the PRC than it was to change the opinions of the Chinese officials.

Meanwhile, the removal of the General Secretary of the CPC, Hu Yaobang, in 1987 was detrimental to smooth Sino-Japanese relations because Hu had built personal relationships with Nakasone and other Japanese leaders. The PRC government's harsh crackdown on pro-democracy demonstrations in the spring of 1989 caused Japanese policymakers to realize that the new situation in the PRC was extremely delicate and required careful handling to avoid Japanese actions that would push the PRC further away from reforms. Beijing leaders reportedly judged at first that the industrialized countries would relatively quickly resume normal business with the PRC after a brief period of complaint over the Tiananmen Square protests of 1989. When that did not happen, the PRC officials made strong suggestions to Japanese officials that they break from most industrialized nations by pursuing normal economic intercourse with the PRC, consistent with Tokyo's long-term interests in mainland China. Japanese leaders like West European and U.S. leaders were careful not to isolate the PRC and continued trade and other relations generally consistent with the policies of other industrialized democracies. But they also followed the United States lead in limiting economic relations to the PRC.

Bilateral structural change developed during the late 1990s to 2004. Japan had been investing in the PRC during the early 1990s, and trade decreased during the late 1990s, but resurged at the millennium. The resurgence might have been because of the prospect of the PRC becoming a part of the World Trade Organization (WTO).

By 2001 China's international trade was the sixth-largest in the world; and over the next several years it was expected to be just under Japan, the fourth largest.

Today, Japan is beginning to invest in the PRC less; a growing movement to cease Official development assistance (ODA) support[11] is beginning to flourish within the Japanese public. Many[who?] argue that Japan should cease aid to the PRC for two major reasons:

It effectively subsidizes the PRC's military build-up to give economic assistance to the PRC, which increasingly threatens Japan’s security.

It helps the PRC to give assistance to many other developing countries, particularly in Africa, and there is no need to assist any country that can afford to assist others.[12]

Those who[who?] argue against cutting developmental on support to the PRC note that by aiding the PRC, the Chinese government is more likely to play by the rules of the international system, and that aid is an atonement for Japan's pre-war and World War II damage[citation needed]. Tension erupted periodically over trade and technology issues. The PRC concern over potential Japanese military resurgence and controversy regarding Japan's relations with Taiwan[citation needed].

"The two sides resolved to face history squarely, advance toward the future, and endeavor with persistence to create a new era of a "mutually beneficial relationship based on common strategic interests" between Japan and China. They announced that they would align Japan–China relations with the trends of international community and together forge a bright future for the Asia-Pacific region and the world while deepening mutual understanding, building mutual trust, and expanding mutually beneficial cooperation between their nations in an ongoing fashion into the future".

"We should not constrain ourselves in the name of friendship between Japan and China. Rather, sound competition and active cooperation will constitute a true "mutually beneficial relationship based on common strategic interests." Confucius said, "At thirty, I stood firm." In the same way, Japan and China must now stand atop the international stage and work to spread to the rest of the world this spirit of benefiting together".

Although Japanese and Chinese policymakers claimed that "ice-breaking" and "ice-melting" occurred in the bilateral relationship between 2006 and 2010, however, none of the fundamental problems related to history and disputed territory had been resolved, and so there was a virtual "ice-berg" under the surface.[17]

On September 7, 2010, after a Chinese fishing trawler collided with two Japanese Coast Guard patrol boats near the disputed Senkaku Islands, the captain of the trawler, Zhan Qixiong, was arrested by Japanese sailors, sparking tensions.[19] Some media outlets speculated that China's contemporary reduction of export quotas of rare earth metals, now more in demand in China as its high-tech industry develops,[20] including reduction to Japan, could be related to the dispute.[21][22] Although officials from the Chinese Ministry of Commerce denied such a relationship,[23][24] the Japanese government took this action by China as a de facto trade embargo and decided to set aside 53.3 billion yen for the following measures to reduce dependence on Chinese mineral resources:[25][26][27]

¥19.7BN towards development of rare earth minerals abroad

¥1.6BN towards recycling, urban mining and developing alternative technology by the government and the private sector

Both China and Japan claim sovereignty over East China Sea islets that Japan calls the Senkaku Islands and China calls the Diaoyu Islands. Tensions have risen since September 2012, when the Japanese government purchased three of the islets from a private Japanese owner, leading to widespread anti-Japan demonstrations in China.[29] Then-Prime Minister Yoshihiko Noda purchased the islets on behalf of the central government to "pre-empt Tokyo Governor Shintaro Ishihara's plan to purchase them with Tokyo municipal funds. Ishihara is well known for his provocative nationalist actions, and Noda feared that Ishihara would try to occupy the islands or otherwise use them to provoke China."[29] Professor Joseph Nye of Harvard University believes Chinese officials chose to ignore Noda's manifest motives, regarding any Japanese government purchase as proof that Japan is trying to disrupt the status quo.[29] In September 2012, General Xu Caihou, vice chairman of the Central Military Commission, said to the Chinese military "prepared for any possible military combat,".[30] Relations deteriorated further after the Japanese government purchase of the Senkaku islands, to the extent that China decided to skip IMF meetings held in Japan.[31] Trade relations deteriorated badly during the latter half of 2012 [32] and Chinese government aircraft intruded into disputed airspace for the first time since 1958.[33]

Richard Katz, editor of The Oriental Economist Report, argues in the pages of Foreign Affairs that the Diaoyu/Senkaku island dispute will not reach a critical threshold. "Even though tensions between China and Japan are rising, an economic version of mutual deterrence is preserving the uneasy status quo between the two sides."[34] Katz maintains that China needs Japanese products as much as Japan needs to sell them. "Many of the high-tech products assembled in and exported from China. . .use advanced Japanese-made parts. China could not boycott Japan, let alone precipitate an actual conflict, without stymieing the export-fueled economic miracle that underpins Communist Party rule."[34] Compounded with Washington's commitment to come to Japan's defense, peace will most likely prevail. Japan remains the largest source of foreign investment in China today.[35]

China has sent drones to fly near the islands. Japan has threatened to shoot these down, which China has said would be an act of war.[36]

United States Navy captain James Fanell has used open source official Chinese media sources to show that China is preparing for a potential short decisive war against Japan to seize the islands.[37]

In its 2013 white paper, Japan called recent Chinese actions "incompatible with international law."[38] The paper also mentioned Operation Dawn Blitz, after China had called for the exercise to be scaled back.[39]

Japanese reconnaissance planes and Chinese fighter jets came perilously close in an overlapping disputed airspace over the East China Sea in late May 2014. The incident occurred as China was taking part in joint maritime exercises with Russia. China and Japan each accused the other of causing a potentially dangerous situation. The airspace where the close encounter took place is claimed by both countries as part of their "air defense identification zones." Beijing and Tokyo exchanged protests over the incident.[40]

As Iechika[44] and many others point out, the fundamental concerns of the Sino-Japanese relations has been the issues of history and Taiwan. Therefore, this article describes the above two issues in the following.

There also remains the dispute over the Senkaku Islands (Diaoyu Islands), which resulted in clashes between Taiwanese (Chinese) protesters and the Japanese government in April 2005. The incident led to anti-Japanese protests and sporadic violence across the PRC, from Beijing to Shanghai, later Guangzhou, Shenzhen and Shenyang.[47] In August 2012, Hong Kong activists landed on one of the disputed Diaoyu/Senkaku Islands, and Japanese nationalists responded by landing on the island the following week. The incidents sparked the largest-scale anti-Japanese protests in China for decades in which protesters vandalized Japanese shops and cars.[48] On the 14th of September relations deteriorated even further in response to Japan’s announcement of plans to buy the island from its private owners. The news resulted in the Chinese government sending six surveillance ships to the island and further anti-Japanese protests in which protesters attacked the Japanese embassies in Shanghai and Beijing.[49]

The PRC and Japan continue to debate over the actual number of people killed in the Rape of Nanking. The PRC alleges that at least 300,000 civilians were murdered while Japan claims a far less figure of 40,000-200,000. While a majority of Japanese believe in the existence of the massacre, a Japanese-produced documentary film released just prior to the 60th anniversary of the massacre, titled The Truth about Nanjing, denies that any such atrocities took place. These disputes have stirred up enmity against Japan from the global Chinese community, including Taiwan.

After the First Sino-Japanese War in 1894-95, according to the Chinese scholar, Jin Xide, the Qing government paid a total of 340,000,000 taels of silver to Japan for both reparations and "booty", equivalent to (then) 510,000,000 Japanese yen, or about 6.4 times the annual revenue of the government of Japan. Similarly, the Japanese scholar, Ryoko Iechika,[50] calculated that the Qing government paid a total of $21,000,000 (about one third of revenue of the Qing government) in war reparations to Japan, or about 320,000,000 Japanese yen, equivalent to (then) two and half years of Japanese government revenue. Japan used the reparations for the expansion of its navy (38.2% of the payment), ad hoc military expenditures (21.6%), direct expansion of the army (15.6%), and constructions of new battleships (8.2%).

Ex-Japanese Prime MinisterHatoyama Yukio offered personal apology for Japan's wartime crimes, especially the Nanking Massacre, "As a Japanese citizen, I feel that it's my duty to apologise for even just one Chinese civilian killed brutally by Japanese soldiers and that such action cannot be excused by saying that it occurred during war."[53]

The Japan–Taiwan official split is one of the fundamental principles of Sino-Japanese relations. The PRC emphasises Taiwan is a part of China and the PRC is the only legal government of China (cf. One-China policy). By the 1972 agreement, the Treaty of Taipei was argued to be invalid.

^This argument is only the point of view of a very small minority of Japanese, while the rest of Japan does not hold these views. This does seem to be the popular, misinformed view of most Chinese nationalist scholars, however.